Invest online in XTBs with Desktop Broker and access the benefits of corporate bonds for your clients.
What are XTBs?
Advisers can now access individual corporate bond returns from a range of 100 companies through their broker.
XTBs (Exchange Traded Bond units) are available using the same platform as shares and provide a listed fixed income alternative in a diversified investment portfolio.
They have the same benefits of ease of access and transparency as other ASX investments you trade through Desktop Broker.
To find out more about XTBs, click here.
Lonsec Research approved
Lonsec's ‘approved’ rating indicates that Lonsec Research believes that XTBs can generate risk adjusted returns in line with relevant objectives.
“XTBs provide a transparent and straight forward means to offer retail investors a choice of fixed income investments usually only available to institutional investors”. Michael Elsworth, General Manager, Specialised Research, Lonsec Research.
To find out more, download the Lonsec report here.
Benefits of XTBs
Investing in XTBs gives your clients:
- Choice & access to a wide range of corporate bonds from ASX 100 companies
- A regular and predictable income stream so you can match your clients' income to their cash flow requirements
- A little more return for a little more risk than Term Deposits
- Corporate bonds offer capital stability and greater security of capital repayment than shares and hybrids
- Available to SMSFs as part of their investment portfolio
Discover XTB's Model Portfolios
To help you to start incorporating fixed income in your clients' portfolios, XTBs has developed a suite of Model Portfolios.
- High Yield: Provides a regular and predictable income stream with an absolute return above TDs.
- Maturity Ladder: Provides return of capital on a yearly basis to manage cash flows
- Concentrated High Yield: A portfolio comprised of just five of the highest yielding XTBs.
- Cash Plus: Provides a monthly income stream and is competitive with at 'at-call' bank accounts and TDs.
Build a custom portfolio with XTB's Cash Flow Tool
You can also build a customised portfolio for your clients and calculate their income with XTB's Cash Flow Tool.
Select up to 10 XTBs and check both the annual coupon payments and total income over the life of the investment.
You can even email yourself a copy of the portfolio – to keep in your files, or send on to your clients.
What your clients are investing in and their cash flow
Current Price: The price paid for the XTBs when bought on ASX.
Coupons: What you receive during the life of your XTB investment, paid half yearly or quarterly.
Coupon Rate: The amount paid as a percentage of the Face Value per XTB (i.e. 500 XTBs x 7.75% x 100 = $3,875).
Current Yield: similar to the Dividend Yield on shares. It is the yield you will receive each year, based on your XTB Buy price (i.e. $7.75 / ($117.84 x 100) = 6.58%).
Face Value: The amount you receive at maturity per XTB (500 XTBs x $100 = $50,000).
Yield to Maturity: reflects your overall return, based on the Current Price, receiving Coupons during the life of the XTB and the Face Value at maturity.
How do I invest in XTBs for my clients?
Investing in corporate bonds via XTBs is similar to investing in equities. Simply place an order online through the Desktop Broker order pad.
To start trading, follow these steps:
- Use the XTB interactive table to select which XTBs you want to invest in and read the relevant Product Disclosure Statement for the XTBs you have selected.
- Login to Desktop Broker and enter the ASX 6-letter code (starting with YTM) of the XTB product you wish to trade in the Trade icon.
- Your order is placed; the new XTB units are transferred to your client's CHESS holdings and you’ll see them in their portfolio.
- XTBs (Exchange Traded Bond units) provide access to the returns of individual corporate bonds on the ASX.
- XTBs give income and capital repayment of specific, individual corporate bonds (e.g. Telstra, Woolworths or BHP bonds).
- XTBs trade on ASX and their performance closely follows their individual bond performance in the wholesale market and are 100% backed by the actual bonds.
- Each XTB has the same maturity date and coupon payment frequency as its corporate bond (e.g. a 3-year bond with a coupon of 5% = a 3-year XTB with a coupon of 5%).
- There are currently close to 50 XTBs available (including a mix of fixed and floating) across a broad range of larger ASX listed companies covering the majority of key industry sectors.
- For each corporate bond, a new XTB is quoted on ASX, each with its own ASX 6-letter code (all codes start with YTM, e.g. the Woolworths XTB is YTMWOW).
- The yield and price of each XTB reflects the yield and price of the underlying bond, after fees and expenses. For fixed-rate XTBs, the fees are 0.4% of the face value each year for the life of the bond, and 0.2% p.a. for floating-rate XTBs.
- The impact of the XTB fee is to lower the yield of the XTB compared with the bond. A corporate bond trading in the wholesale market at a yield of 4.8% becomes an XTB trading on ASX at about 4.4%.
- Clients seeking a regular, reliable income stream
- Clients looking for capital stability in their investments and Self Managed Super Funds (SMSFs)
- Clients looking to build their investment portfolio via direct investments on ASX
- Clients seeking to diversify their portfolio and blend fixed income with equity and property investments
- Credit risk: the risk the bond issuer defaults on coupon or principal payments
- Liquidity risk: the risk you will not be able to sell your XTBs on ASX
- Market risk: the risk of adverse market movements that impact the bond and XTBs
- Trust risk: the risk the Trust and Responsible Entity structure fails
For more information on risks, click here.